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Comment by Frondo | Hacker News Reader

Man, when I read about how the swipe fees for credit cards remain so high (3%!!), even decades after the infrastructure's been built out and can chug along in maintenance mode, I just think.. where's the market solution to this? Where's the upstart processor that charges 1%, still make bank because it's just 1s and 0s now, and exert real competitive pressure on Visa and MC?

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The legal way might put pressure on Visa and MC, their attempt at a settlement failed last year [1]. I don't know what happened next.

> The settlement may now need to be renegotiated, or the case could go to trial.

> "Swipe fees are an improper and unnecessary hidden tax on consumers," said Jeffrey Shinder, a Constantine Cannon partner representing Amazon.com Inc (AMZN.O), Costco Wholesale Corp (COST.O), Wal-Mart Stores Inc (WMT.N) and other opponents of the accord. "The structure of swipe fees is back on the table."

Anyone knows if the case went to trial after that court of appeals decision?

To compare, in the E.U. [2], "the Regulation caps interchange fees for consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction.". In the U.S. the fees today seem to be 10x higher[3].

[1] http://www.reuters.com/article/us-visa-mastercard-settlement...

[2] http://europa.eu/rapid/press-release_MEMO-16-2162_en.htm

[3] https://www.richmondfed.org/~/media/richmondfedorg/publicati...

Those who pay the fees (merchants) aren't the ones who chose which cards their customers have. High fees also seem to allow high rewards to draw more consumers. I think it would be difficult to challenge Visa and MC just by undercutting them. It seems that regulatory action is the most likely thing to break Visa and MC's dominance.

Charging 1% for existing payment network card transactions would put them out of business real fast when the wholesale cost to processors is more than 1%.

Do you have a source for this?

https://usa.visa.com/content/dam/VCOM/download/merchants/vis...

Those costs are only so high because of reward systems that pay credit card users for purchases.

Get rid of all of the rewards and 1% is easily enough to cover transaction costs.

Then how do they operate in the EU, where the fees are capped at 0.3%?

businesses do not generally* offer discounts to customers that pay in cash so consumers use the high return cards that also cost businesses the most in fees. Aka, it's the current inefficient market standard.

*business that have lots of small transactions often charge extra for credit card purchases below a certain amount and big purchases will also charge extra since the marginal/absolute cost is a lot.

Who knows, maybe cryptocurrency will be the answer for this, by accepting Bitcoins/Litecoins at the cashier.

At 5 dollar transaction fees [1], credit cards are much cheaper for most cases (they also give rewards for purchases).

[1]: https://www.reddit.com/r/btc/comments/6gek0z/average_bitcoin...

That's what off chain payments is for.

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